Annual report pursuant to Section 13 and 15(d)

INTANGIBLE ASSETS

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INTANGIBLE ASSETS
12 Months Ended
Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS

     Intangible assets include patents purchased and patents acquired in lieu of cash in licensing transactions. Patents purchased are recorded based at their acquisition cost and patents acquired in lieu of cash are recorded at their fair market value. Intangible assets consisted of the following:

 

    December 31, 2014     December 31, 2013  

Weighted average

amortization period

(years)

Patents   $ 49,914,360     $ 7,204,937   8.19
Less: accumulated amortization     (6,550,528 )     (1,047,278 )  
    $ 43,363,832     $ 6,157,659    

 

 

     Intangible assets are comprised of patents with estimated useful lives between approximately 1 to 13 years, though the weighted average is on the shorter side of this range. Once placed in service, the Company amortizes the costs of intangible assets over their estimated useful lives on a straight-line basis. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. Amortization of patents is included as an operating expense as reflected in the accompanying consolidated statements of operations. The Company assesses fair market value for any impairment to the carrying values. As of December 31, 2014 and 2013 management concluded that there was no impairment to the acquired assets.

 

    Amortization and depreciation expense for the years ended December 31, 2014 and 2013 was $5,528,280 and $1,038,505, respectively. Amortization expense for patents comprised $5,527,762 and $1,038,505 for the years ended December 31, 2014 and December 31, 2013.  Future amortization of current intangible assets, net is as follows:

 

2015   $ 10,222,592  
2016     9,167,722  
2017     6,679,231  
2018     4,963,817  
2019     3,993,837  
2020 and thereafter     8,336,633  
Total   $ 43,363,832  

 

Since November 2012, the Company has continued to add to its intangible assets, through either the purchase of intangible asset directly or purchasing entities holding intangible assets.  During the years ended December 31, 2014 and December 31, 2013, the Company made the following intangible asset acquisitions:

 

-   In April 2013, the Company through its subsidiary, Relay IP, Inc. acquired a US patent for $350,000;
-   In April 2013, the Company acquired 10 US patents, 27 foreign patents and 1 patent pending from CyberFone Systems valued at $1,135,512;

 

-   In June 2013, in connection with the closing of a licensing agreement with Siemens Technology, we acquired a patent portfolio from that company valued at $1,000,000;
-   In September 2013, the Company acquired 14 US patents for a total purchase price of $1,100,000;

 

-   In November 2013, the Company acquired four patents for 150,000 shares of the Company’s Common Stock, which the Company valued at $718,500 based on the fair market value of the stock issued;
-   In December 2013, the Company acquired certain patents from Delphi Technologies, Inc. for $1,700,000 pursuant to a Patent Purchase Agreement entered into on October 31, 2013 and Amended on December 16, 2013;

 

-   In December 2013, in connection with a licensing agreement with Zhone, the Company acquired a portfolio of patents from Zhone;
-   In December 2013, in connection with a settlement and license agreement, we agreed to settle and release another defendant for past and future use of our patents, whereby the defendant agreed to assign and transfer 2 U.S. patents and rights to the Company;

 

-   In May 2014, we acquired ownership rights of Dynamic Advances, LLC, a Texas limited liability company, IP Liquidity Ventures, LLC, a Delaware limited liability company, and Sarif Biomedical, LLC, a Delaware limited liability company, all of which hold patent portfolios or contract rights to the revenue generated from the patent portfolios;
-   In June 2014, we acquired Selene Communication Technologies, LLC, which holds multiple patents in the search and network intrusion field;

 

-   In August 2014, we acquired patents from Clouding IP LLC, with such patents related to network and data management technology;
-   In September 2014, we acquired TLI Communications, which owns a single patent in the telecommunication field;

 

-   In October 2014, we acquired three patent portfolios from MedTech Development, LLC, which owns medical technology patents.